Forex traders go belly-up
WORRYING SIGNS: COMPANIES OWE INVESTORS UPWARDS OF R1BN Praesidium and Imagina FX were placed in liquidation last year after clients’ demands for refunds went unanswered.
As the bells were ringing in the 2019 New Year, Praesidium Global fired off a self-congratulatory newsletter to investors announcing that its Managed FX Fund had clocked up an astonishing return of 43.5% for the previous year.
Returns like this were apparently par for the course, ranging between 43.5% and 74.3% for each of the previous four years.
The newsletter goes on: “‘Too good to be true’ is a statement we hear every day when new clients first learn about the kind of returns the fund has been delivering year after year.
“And when comparing fiveyear total returns of Praesidium, to the performance of more familiar investment products, who could blame them!”
Praesidium apparently did this by investing in forex markets, managed by “an experienced team of traders”.
The author of the newsletter was Gary Wilde, Praesidium Global’s Indian Ocean Islands director, based in Mauritius.
As it turns out, it was too good to be true.
In June 2020, Praesidium Wealth investors received a newsletter with some alarming news.
Covid was a “black swan” event that had created unprecedented volatility in world markets, resulting in a 40% drawdown in funds under investment.
Praesidium, like many other investment companies, was not immune to this volatility.
But there was no need to worry, clients were told, as plans were being put in place to recover from these losses.
Some clients were less than satisfied at this sudden turn of events. They say this was the first time in five years the company had reported losses. Some feared their entire investment was in danger of disappearing.
Praesidium reassured investors that business continuity plans had been put in place. It also promised better and faster communications with clients, who were understandably concerned about trading results.
The company decided to waive its usual performance fees on trading accounts until the drawdown losses were recovered.
The trading team also volunteered to put in extra hours of trading – which veteran traders would recognise as a sign of desperation, since more trading does not necessarily mean more profits (often, the reverse).
Big funds at risk
One investor has $1.9 million (about R28.9 million) at risk in the company. Another overseas-based investor sunk $900 000 into the fund.
“We were introduced to the Praesidium by a friend when we were on a trip to Mauritius, with promises of returns of about 3% a month,” says the investor, who asked not to be named.
“We initially put in $400 000, which went into a bank in Mauritius, and then later put in another $500 000, which went to Cyprus.”
Everything seemed to be going swimmingly for the first year. The investor was able to log into the company’s investment platform, which reflected steady growth in the account.
It was only when she received the “black swan” letter notifying her of a 40% drawdown in the trading account that she started to ask questions.
She was told that her funds were being traded through a platform called FXPrimus in Cyprus. She reached out to FXPrimus in Cyprus, which apparently had never heard of Praesidium.
It wasn’t looking good. An investigator who looked into this could find no event on the forex market that would account for a 40% drawdown.
It was the same story for Michael Suskin, a Pretoria-based entrepreneur who is owed about R12 million from an associated company called Imagina FX, under the direction of Cape Townbased Craig Massyn, the lead forex trader.
“Craig [Massyn] was an associate of mine,” says Suskin, a registered financial consultant who attended several courses in forex, but after hearing of the possibility of earning 2-2.5% a month, decided to invest with Imagina.
“I started investing in 2015 and I was seeing awesome returns. I asked Craig a lot questions before I started investing, and once I was satisfied, I placed my first investment in the first quarter of 2015, and made a few more allocations after that.
“I first got a bit concerned in March 2020 when I noticed a drop in the returns, which was the first time there was a drop since I started investing in 2015.”
Investors like Suskin were by now in panic mode, trying to withdraw their funds to protect whatever was left. Their requests for withdrawal were met with a string of messages explaining technical and regulatory hurdles that had to be crossed before money could be released.
To date, investors contacted have yet to receive a cent. Nor will they, until the liquidation process is finalised.
Liquidation
Praesidium and sister company Imagina FX were placed in liquidation in October 2020 after investors approached the court saying they were unable to make withdrawals.
The question the liquidators are now trying to answer is whether there is anything left for investors.
There were three companies bearing the name Imagina: Imagina FX, Imagina Asset Management, and Imagina International Trading, based in Mauritius.
Not long after the “black swan” letter was sent out to investors, Chad Thomas of IRS Forensic Investigators was asked by an overseas client to see what he could sniff out. What he found was shocking.
“Investors were asking for refunds and they were getting the usual run-around. My advice was to stop waiting and to proceed against the company for liquidation.”
Facebook and social media were now aflame with accusations of fraud by the directors of the company, which accusations were denied.
Criminal cases have since been opened against Praesidium and Imagina.
I first got a bit concerned in March 2020